Ohio port authorities and communities should be aware of two major changes to economic development law that take effect on April 7, 2009. Senate Bill 353 changes Ohio law to require that port authorities produce plans detailing their development, construction, and improvement goals and describing which public finance mechanisms they propose to rely upon for future growth. Through Senate Bill 353, the General Assembly also has authorized Cuyahoga County to create a powerful new nonprofit corporation to manage the redevelopment of deteriorated urban areas. Known as a “county land reutilization corporation” (“CLRC”), the new entity may serve as a model for similar CLRCs throughout the state.

Port Authority Development Plans

Port authorities will face major legal changes as a result of Senate Bill 353. The legislation substantially altered Chapter 4582 of the Revised Code to require port authorities to produce and make public formal plans for their future growth and development.

Under new law, 4582.07 and 4582.32 will require each port authority to create a plan describing its development, construction, and improvement goals. The plan will include maps, profiles, and other data necessary to set forth the location and character of the work planned by the port authority. Proposed financing mechanisms, including bonds, leases, taxes, grants, and loans, must also appear in the plan.

In addition, each port authority must permit the inspection of its plan and hold a hearing to review objections to the plan. Notice for the hearing must appear in each county where a political subdivision participating in the port authority lies, and the port authority must cause notice to be served upon owners of uplands contiguous to any submerged lands affected by its plan.

After conducting a hearing to review objections to its plan, the port authority board of directors may adopt the plan, with any modifications or amendments, as its official plan. The board may also, pursuant to 4582.08 and 4582.33, modify, amend, or extend the plan after complying with the notice requirements described above.

CLRC Powers

Cuyahoga County’s new CLRC will barely resemble its predecessors under Ohio law. Similar land banks in recent years consisted of municipal programs with limited authority to acquire foreclosed homes after lengthy legal procedures. The land banks were hampered by fears of purchasing legally-risky properties with environmental or title problems. Without their own employees, the land banks taxed time-strapped existing municipal personnel for management and oversight. Moreover, as municipal entities, the land banks stood vulnerable to political pressures. Senate Bill 353 changes all of that.

In short, the new CLRC can proactively purchase; demolish or improve; and sell properties, all without facing the hitches experienced by its predecessors. It also may repair nuisance properties (attaching a lien for the costs) and enforce code violations. Directing these efforts will be a board of at least five members, including the county treasurer, two county commissioners, and two appointees. In addition, the board may hire an executive director and a staff to implement and manage its initiatives.

Property Acquisition and Improvement

One of the greatest powers of the CLRC will be its authority to acquire properties. Pursuant to Senate Bill 353, the CLRC will have authority to foreclose on tax-delinquent properties through an expedited procedure. Another example of these powers will be the CLRC’s ability to initiate a combined foreclosure and forfeiture action over a property one year after a tax delinquency occurs. The CLRC also will enjoy special powers to purchase and sell tax certificates. In addition, the CLRC may acquire forfeited lands, and it will have authority to buy properties and groups of properties to further its ends.

Once the CLRC acquires a property, it may wield several special powers to ease the process of transforming the property into a valuable community asset. Most importantly, the CLRC may hire independent contractors to demolish or rehabilitate properties, and it may enter contractual agreements for the upkeep of buildings that it owns.

Funding Mechanisms

In time, the CLRC may draw financial support from profits that it earns. In the meantime, however, Senate Bill 353 establishes several mechanisms by which the CLRC may raise money. A primary source of funding appears likely to be the county commissioners, who may transfer up to 5% of penalties and interest on delinquent real property taxes as well as up to 5% of the proceeds of the sale of tax-foreclosed properties to the CLRC. As part of that power, the county may issue securities in anticipation of the collection of delinquent taxes and advance the proceeds of these securities to CLRC. The county also may opt to collect 1% monthly interest on unpaid property taxes (instead of collecting it semiannually at the statutory annual interest rate) and to direct those proceeds to the CLRC.

Among other avenues of financial support, the CLRC will enjoy the power to borrow; the power to request that a county or municipality issue bonds or tax-increment financing on its behalf for the purpose of constructing public infrastructure improvements; the power to request a countywide property tax levy or a portion of the county’s unvoted, “inside” millage for the operation, maintenance, acquisition, and improvement of land and buildings owned or used by the CLRC; the power to receive gifts; the power to charge fees for services performed or rent for properties leased; and the power to purchase and sell tax certificates.

Advantages and Limits

Senate Bill 353 offers the CLRC several advantages over public and private entities that might seek to accomplish similar objectives. For example, the proprietary and financial information of the CLRC will be exempt from public records requirements. In addition, property owned by the CLRC will be exempt from property taxes. The CLRC also will be immune from numerous state environmental regulations.

Despite its broad authority, the CLRC will face several limits. The CLRC must comply with open meetings laws, unless a majority of its board votes to close a meeting to address confidential matters. Competitive bidding and prevailing wage requirements will apply to CLRC activities (except in the sale of properties, which the CLRC may conduct without competitive bidding). The CLRC may not acquire additional properties if doing so will cause the percentage of occupied properties owned by the CLRC to exceed 25%. The CLRC also must file regular reports with the General Assembly and the auditor of state. Finally, many of the CLRC powers will expire two years after the Secretary of State files the CLRC’s articles of incorporation.

Conclusion

Senate Bill 353 substantially changed Ohio economic development law. It also might point to additional changes in Ohio law coming in the near future. The bill’s changes to Ohio port authority law could signal a heightened attention to port authorities by the General Assembly in 2009. In addition, if Cuyahoga County’s CLRC succeeds, Ohio legislators likely will explore offering CLRC authority to other communities when the current legislation’s two year authority lapses. Ohio port authorities and communities should follow these changes closely as they weigh which economic development tools best suit their needs.